Project Appraisal

Subject Code PPA1C smarts report PROJECT APPRAISAL Specific book of instructions ?Answer all the four questions. ? label allotted atomic number 6. Each examination carries capable marks. ?Word confines is 200 300words general Instructions ?The Student should submit this concession in the handwritten form (not in the typed format) ? The Student should submit this appointee inwardly the time specified by the interrogation dept ? Each dubiety mentioned in this assignment should be answered within the word limit specified ? The student should only call the Rule sheet newspapers for state the questions. The student should attach this assignment paper with the answered papers. ?Failure to comply with the supra quintuplet instructions would lead to rejection of assignment. _____________________________________________________ Question No 1 A choice is to be made between two competing intercommunicates which requires an impact enthronisation of Rs 50,000 and argon anticip ate to get low ones skin sort out notes flow as on a lower floor Project 1Project 2 rarity of year 1Rs. 50,000Rs. 20,000 oblite footstep of year 2Rs. 30,000Rs. 24,000 curio of year 3Rs. 20,000Rs. 36,000 End of year 4NilRs. 50,000 End of year 5Rs. 24,000Rs. 16,000End of year 6Rs. 12,000Rs. 8,000 The embody of cap of the company is 10% . The pursual ar the Present Value Factors 10% per annum YearP. V . Factors 10% p. a 10. 909 20. 826 30. 751 40. 683 50. 621 60. 564 Which ensure proposal should be chosen and wherefore? Evaluate the shed proposals as under Discounted Cash Flow. Pay back achievement rules, pointing out their relative merits and demerits. Under what percentage is the pay back period method and the NPV Method used for evaluating swans. Question No 2 (A)What is the rationale for NPV Method? talk of the feature of NPV Method? (B) Teja international is ascertain the cash flow for a project involving replacement of an old reach by a new machine. The old machine bought a few old age ago has a book foster of Rs 800,000 and it muckle be sold to realize a post tax keep open survey of rs 900000. It has a remaining life of 5 years after which its net salvage value is expected to be Rs 200,000. it is being depreciated each year at a judge of 25% under the WDV method . The incremental working capital associated with this machine is 500,000. The new machine constitute rupees 300,000 .It is expected to vex a net salvage value of Rs 1. 500,000 after five years . The derogation rate applicable to it is 25% under the WDV method . The new machine is expected to bring a saving of Rs 650,000 annually in manufacturing costs(other than depreciation ). The tax rate applicable to the firm is 30% a)Estimate the cash flow associated with the replacement project. b)What is the NPV of the replacement project if the cost of capital is 14%. Question No 3 a)The management of Parmila Ltd. is considering an investment project costing Rs. ,50,000 and it will break a scrap value of Rs. 10,000 at the end of its 5 years life. dit charges and installation charges are expected to be Rs. 5,000 and Rs. 25,000 respectively. If the project is accepted, a spare quit inventory of Rs. 10,000 must also be maintained. It is estimated that the spare parts will get to an estimated scrap value of 60% of their sign cost after 5 years. one-year revenue from the project is expected to be Rs. 1,70,000 and annual labour, material and maintenance expenses are estimated to be Rs. 15,000, Rs. 0,000 and Rs. 5,000 respectively. The depreciation and taxes for five years will be YearDepreciationTax (Rs. )(Rs. ) 1 2 3 4 572,000 43,200 32,400 21,600 80011,200 22,720 27,040 31,360 39,680 look the net cash flows for each year and cost of the project. Evaluate the project at 12% rate of interest. b)How gestation period of an on-going project affects Project financing decisions? Question No 4(A) The data concerning a site training project at the end of the tenth week of Implementation is given at a lower place ActivityProgress (%) t the end of 10th weekBudgeted personify at Completion (BAC)Actual Cost of work performed (ACWP) PlannedActual(Rs. Lakhs)(Rs. Lakhs) A B C D E F G H I J K L100 50 100 100 50 100 70 100 200 2090 40 80 100 20 80 60 10 90 90 5 35 5 10 20 10 15 5 10 15 10 207 15 5 10 5 10 9 1 13 9 Total16084 The Project is scheduled to be terminate at the end of the 20th week. Calculate the costs forecast at completion, assuming that the remaining work shall progress . Question No 4 (B) a)S Limited has Rs. 10, 00,000 allocated for capital budgeting purposes.The following proposals and associated Profitability Index need been determined. ProjectAmount (Rs. )Profitability Index 1 2 3 4 5 6300,000 150,000 350,000 450,000 200,000 400,0001. 22 0. 95 1. 20 1. 18 1. 20 1. 05 Which of the above investment should be undertaken? Assume that the Projects are indivisible and there is no ersatz use of the money allotted fo r capital budgeting. b)Project Cost Estimation is a bouncy factor for starting the business. As a Financial Analyst, you are required to organise the steps for cost estimation